Copper traders most bullish in two months

LONDON: Copper traders are the most bullish in two months on speculation that demand will strengthen from the US to China at a time when stockpiles monitored by the world's biggest metals exchange are at a 2 1/2 year low. Fourteen of 29 analysts surveyed by Bloomberg expect the metal to gain next week and 10 were neutral, the highest proportion since December 23.

Inventories tracked by the London Metal Exchange are set for a fifth consecutive monthly drop and money managers have their biggest bet on rising prices since early August, Commodity Futures Trading Commission data show. Global equities and commodities climbed to at least six- month highs this week after euroarea finance ministers approved 130 billion euros ($173 billion) in aid for Greece to avert an economic collapse.

China said on February 18 that it will cut banks' reserve requirements to boost growth and US indicators pointed last week to sustained economic expansion as Barclays Capital anticipates a third consecutive copper shortage this year.

"Copper is benefiting from very positive sentiment and from high levels of liquidity," said Daniel Briesemann, an analyst at Commerzbank in Frankfurt. "It's being driven by restrained supply and robust demand."

The metal rose 11% to $8,410 a tonne this year on the LME, the best start since 2008. The Standard & Poor's GSCI gauge of 24 commodities climbed 9.8% and MSCI All-Country World Index of equities gained 11%. Treasuries lost 0.4%, a Bank of America index shows.

CHINA MEASURES

The People's Bank of China said that the proportion of cash that lenders must set aside will fall half a percentage point from Friday, with Standard Chartered and HSBC Holdings predicting more reductions this year. The 0.4% increase in the Conference Board's gauge of the US outlook for the next three to six months on February 17 followed a 0.5% increase in December, the strongest back-to-back gain in almost a year. China consumes about 40% of the world's copper and North America accounts for about 11% of demand.

Refined production of the metal lagged usage by 119,000 tonne in November, the most since March 2010, the International Copper Study Group said on Thursday. Barclays estimates a shortage of 3,76,000 tonne this year, and another shortfall in 2013. The International Monetary Fund forecasts growth of 8.2% in China this year will drive a global expansion of 3.3%. Inventories of copper monitored by the LME slid 36% since October to 3,03,500 tonne, the lowest level since September 2009, exchange data show.

SHANGHAI STOCKPILES

While combined stockpiles tracked by bourses in London, New York and Shanghai slid 7.7% since October, Shanghai copper inventories more than doubled this year, the data show. China's manufacturing may shrink for a fourth month in February, a February 22 preliminary reading from HSBC and Markit Economics showed, as exports are capped and the housing market cools.

Refined copper imports by the nation fell 18% in January from a record in December, the first decline in eight months, according to Bloomberg calculations based on February 21 data from the General Administration of Customs.

Imports may decrease this year, Jacob Shen, a trader at INTL FCStone, said in an interview in Singapore on Thursday. Europe remains a risk to commodities used in construction and industry, even after ministers approved a second bailout and persuaded investors to provide more debt relief to Greece.

Europe's economy will shrink 0.3% this year, the European Commission said on Thursday, abandoning a November forecast of 0.5% growth. Copper benefited "from the temporary resolution of Greece's financial woes," said Mark Lewon, the president of Utah Metal Works, a Salt Lake City-based company recycling industrial scrap.

"I fully expect Greece to continue to have problems as government revenues fail to reach the levels expected due to the contraction in the economy." Goldman Sachs Group expects the metal to fall to $8,000 in three months before rebounding to $9,000 in a year, 7% above Friday's price.